ADC 181A 

FMS SDRs for Product Quality and Latent Defects 

1. ORIGINATOR: 

 Service/Agency: Navy International Logistics Control Office (ILCO)

2. REFERENCES: 

 a. DLAI 4140.55/AR 735-11-2 /SECNAVINST 4355.18a/AFJMAN 23-215, Reporting of 

Supply Discrepancies 

 b. DOD 5105.38-M, Security Assistance Management Manual, available at: 

http://www.dsca.mil/samm/

 c. DLMSO Memorandum dated September 14, 2005, subject: Approved Defense Logistics 

Management System (DLMS) Change (ADC) 181, Foreign Military Sales (FMS) Supply 

Discrepancy Report (SDR) for Latent Defects.

 d. DLMSO Memorandum dated November 9, 2005, subject: Withdrawal of Approved 

Defense Logistics Management System (DLMS) Change (ADC) 181, Foreign Military Sales 

(FMS) Supply Discrepancy Report (SDR) for Latent Defects 

3. FUNCTIONAL AREA: Primary: Supply SDR

4. REQUESTED CHANGE: 

 a. Title: FMS SDRs for Product Quality and Latent Defects

 b. Description of Change: This change adds clarifying information for submittal of a 

latent defect under the Supply Discrepancy Report “Latent Defects” submission criteria. It also 

clarifies intent to process quality-related SDRs under PQDR procedures.

 c. Background: 

(1) Subsequent to publication of reference 2.c., it was brought to the attention of 

DLMSO and the SDR Security Assistance Subcommittee that the revised definition for latent 

defect was not legally supportable due to the improper inclusion of repaired items. The ADC 

was withdrawn by reference 2.d. The documentation has been corrected as shown below. 

(2) In addition, this ADC documents the planned procedures for submission of quality 

SDR under automation. A latent defect is authorized for reporting by FMS customers under 

SDR procedures as a discrepant condition. However, U.S. customers report latent defects under 

Product Quality Deficiency Report (PQDR) procedures. This has caused multiple disconnects 
which have been compounded under automation. After several joint Component meetings, the 

resulting agreement is to continue to permit FMS customers to report quality SDRs as currently 

authorized by their Letter of Offer and Acceptance (LOA) agreements, however, under the 

DLMS, the data content on the automated transmission was expanded to accommodate 

additional information needed to research the complaint. The ILCO will accept the customer’s 

complaint as an SDR (if desired, a PQDR is also acceptable). The ILCO will forward the SDR 

submission for continued processing by the ICP/IMM Source of Supply (SoS) under PQDR 

procedures. Input to a PQDR processing system by the ILCO, or after forwarding to the 

ICP/IMM, is acceptable pending full implementation of the DOD WebSDR Defense Automatic 

Addressing System/Product Data Reporting and Evaluation Program (DAAS/PDREP) facilitated 

electric transaction processing. Under the planned interface, the SDR submission will be 

forwarded electronically by the ILCO to DAAS using the DLMS 842A/W format as enhanced 

for PQDR data content. (Already implemented under AFSAC-A.) This transaction will 

ultimately be forwarded to the PDREP application. The PDREP application will use the PQDR 

Interface (developed under the Business Initiatives Council) to forward to Service PQDR 

systems where applicable. Until this interface is completed, 842A/W transactions will be 

forwarded to the SoS SDR system. This will result in some information not being captured since 

it is applicable to quality deficiencies only. The SoS may access DOD WebSDR to view this 

additional data content. Credit reimbursement when applicable will follow SDR rules as 

prescribed under reference 2.b. 

(3) The most appropriate implementation date was debated at the time the ADC 181 was 

published. The resulting DLMSO and DSCA recommendation was that implementation should 

be effective upon ADC publication. Because this revised version of the change is provided for 

clarification of existing procedures and the actual definition of latent defect is not altered, there is 

no longer a concern about retroactive application to previously submitted SDRs or shipments 

occurring prior to publication. 

(4) During coordination of the revised wording for ADC 181A there was an additional 

discussion concerning the wording of the guidance for substantiating documentation which 

originally appeared to impose a testing requirement which would improperly burden the 

customer with substantiating the defect prior to submission of the report. The wording now 

reflects a requirement for substantiating documentation with a list of potentially applicable types 

of substantiating documentation without requiring specific tests be conducted. 

 d. Procedures: Changes are identified in bold italics. 

(5) Revise DLAI 4140.55, Enclosure 7, Security Assistance Guidance, as follows. 

(a) Revise paragraph B.1.a. This is a minimal change to introduce the concept of 

processing under PQDR guidance. Further revision will be made as the above described process 

evolves. 

1. The purpose of this enclosure is to provide specific procedural guidance relevant to the 

processing of Security Assistance (SA) Supply Discrepancy Reports (SDRs) (formerly referred 

to as Reports of Discrepancy (RODs). Based upon United States of America Letter of Offer and 

Acceptance (LOA) agreements, SA customers will use SDRs to report all supply, billing, and 

product quality discrepancies associated with SA shipments. International Logistics Control 
Offices (ILCOs) should also refer to reference A.5 of the basic instruction for overall policy 

related to SA. Quality deficiencies reported via SDR will be investigated within the Inventory 

Control Point/Integrated Material Manager under procedures associated with Product Quality 

Deficiency Reports (PQDRs). 

(b) Revise paragraph B.1.a to clarify rules for product quality SDR submission. 

a. Product Quality (Item) Deficiencies. The SA customer must provide evidence that a receipt 

inspection was performed and the defect could not be detected at that time and that the defect is 

present for reasons other than deterioration or damage incurred during storage or handling. 

Quality deficiencies include deficiencies in design, specification material, manufacture, and 

workmanship. The submitter may must identify by discrepancy code latent defects and quality 

deficiencies which result in a safety hazard. A detailed description of the complaint may must

be provided if needed to supplement discrepancy codes. In addition, provide photographs, test 

data, and related documentation, if available. When submitting a latent defect discrepancy 

code on the SDR, the report must include substantiating documentation to validate the latent 

defect such as the applicable test report used to identify the latent defect. Latent defects must 

be submitted to the ILCO with substantiating documentation. Following is a list of potentially 

applicable forms of substantiating documentation: 

a. Receipt tests conducted and test reports (including test equipment model, serial 

number and software version) or documentation of receipt tests not conducted and 

justification for tests not conducted 

b. Subsequent tests conducted and results including test equipment model, serial 

number, and software version along with test readings 

c. Justification that initial receipt inspection and testing could not have detected the 

deficiency 

d. Documentation of storage and handling of the item since receipt including type of 

storage. 

(6) Revise DLAI 4140.55, Enclosure 1, Definitions. The original wording is rearranged 

and supplemented. 

18. Latent Defect. A latent defect is defined as a deficiency in an article which effects the 

operability and is not normally detected by examination or routine test, but which was present at 

time of manufacture. Receipt inspection does not necessitate initial operation or extensive 

testing, disassembly, or other extraordinary receipt inspection. This definition is provided for 

supply discrepancy reporting of product quality deficiencies against Security Assistance 

shipments and is not applicable for other SDR submissions. Refer to Enclosure 7, Security 

Assistance Guidance, paragraph B, for required substantiating documentation.

5. REASON FOR CHANGE: To provide additional information to ensure the proper data is 

received for determining a latent defect. To pave the way for PQDR processing of SDRs. 
4. ADVANTAGES AND DISADVANTAGES: 

 a. Advantages: Allows for the identification and resolution of SDRs in a timely fashion

b. Disadvantages: The approved definition does not include a time limit on 

submission of latent defect SDRs, which was requested in the original draft proposal. The 

Defense Security Cooperation Agency (DSCA) disapproved the request for a time limit. 

5. IMPACT 

 a. Publication(s): DLAI 4140.55; and DOD 5105.38-M. 

b. SDR and PQDR processing systems